Market update: Rock solid US growth data, Iranian Rial plunges again

30 Jul

by Mihály Tatár

 

Good Morning!

 

  • Disappointing recession-callers and pessimists, the US GDP data came in as rock solid: 4.1% annualized Q/Q, which is the fastest pace since 2014, while consumption grew by a whopping 4%, despite the high energy prices. (For comparison, France printed a mere 0.2% non-annualized Q/Q growth – almost not growing, that is – clearly the US fiscal and pro-business stimulus has arrived.) Investors didn’t feel energized however, partly on the tech stocks drama – Twitter also delivered a disappointing report -, and partly because this probably means two more Fed rate hikes for 2018 (SPX -0.66%, Nasdaq -1.46%, Twitter -21%, ’everyone’s pension plan’ Facebook sideways at -20%, Apple -2%, Nikkei -0.65%, Shanghai -0.45%, on the market talk that the Trump-Juncker trade deal could easily morph into an economic superpower alliance to counter Asia. Altough, this doesn’t look realistic at the moment – while Germany is clearly pleased with the car tariffs being put on hold, France is very angry, raging that ’agriculture must reamin outside the field of these discussions’, suddenly feeling the heat now. As a sidenote, it’s worth watching Trump’s speech at the US Steel Corp: Whatever your view on the US President, the man is clearly enjoying himself, and it should be evident to all except the mainstream media that the  ’trade war’ project has barely started. (Trump’s definition of free trade: ’Fool’s-trade’.  The year things turned down for the US: 2001, when China was allowed into the WTO, and the ’tidal wave of cheating’ started. Factories should now pop up like mushrooms, and the times when the US accepted a yearly 700 billion USD trade deficit are over.  Not surprisingly, he was received as a superstar.)   While the EURUSD didn’t move much on Friday – 1.1650, traders had high expectation for an ever higher GDP number -, the GBP – 1.31 – remained shaky with the leakes that despite the tough talk, May’s team is terrified that Brexit negotiation’s may indeed fail causing logistical chaos not seen since the nationwide strikes of the seventies, and Google ’Brexit no deal’ searches have spiked – , the Forint continued its correction to 322 against the Euro, while the Turkish Lira remained near its record low after the US threatened Turkey with ’large’ sanctions and decided to hold back F-35 fighter jet deliveries, prompting Ankara to angrily threaten back with ’the US losing a strong and sincere partner’.

 

  • The Iranian Rial had a rough weekend: It collapsed to 102,000 per Dollar (from 50,000 in March (!) with the inflation already having reached 203%), after a report from the Australian media that the US is planning to bomb Iranian nuclear facilities as soon as next month. (This was later called ’fiction’ by US Secretary of Defense Mattis, but the clumsy Australian government communication suggests it was rather a deliberate message or reaction test.) Oil prices did not directly react (WTI 68.90, Brent 74.30 USD, the US draft proposal to roll back US automobile efficiency requirements and the strategic inventory selling topic is in the center of the attention now), even tough geopolitical experts noted that the missile attack on the two Saudi supertankers last week , attributed to Yemeni Houthies, was orchestrated by the Iranian Saviz spy ship, disguised as cargo vessel. The rumour is that after the attacks, Washington is considering an intervention, or at least extended assistance, into the Yemeni war to protect the key waterway.

 

 

Have a nice week,

Mihály

 

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